That significant fall may lead Instinet to announce its first-ever loss when it reports its results for the first three months of 2002 on 18 April, the firm warned last month.

Nevertheless, analyst estimates still call for Instinet to realise a profit of 11 cents a share, according to a poll conducted by Zacks Investment Research.

Instinet's ails, however, are hardly unique.

On Thursday, Knight Trading, a competing electronic trader, said it also expects to announce a first-quarter loss, attributable to reduced trading volume as well as its aggressive overseas expansion.

Also adding to the pain being endured by ECNs is the recent switch by US markets to trading stocks in pennies rather than fractions, or decimalisation.

That has reduced the so-called "spread" - the difference in price between the seller's asking price and what the buyer is willing to pay - and has further eroded profits.

Volume leader

Recent reports have suggested Reuters is looking to merge Instinet with a rival in order to maintain its top spot as the leading electronic trading network, handling more than half the shares traded across all ECNs.

Nevertheless, Instinet, short for Institutional Network, has seen its share of Nasdaq-traded stocks threatened by rival Island ECN.

Island reported on Tuesday that it handles a quarter of all trade volume on the Nasdaq Stock Market, a number that puts it ahead of Instinet.

Those figures, however, are questionable, according to Nasdaq officials, whose statistics show Instinet as the volume leader.

Instinet's electronic network is the oldest of its type. It operates in 40 securities markets throughout the world, including stock exchanges in Frankfurt, London, Paris and Tokyo.

Matching buyer and seller

All ECNs benefit from several advantages of trading shares of stock electronically, including lower prices and anonymity for customers.

The electronic networks use modern technology to improve the efficiency of trade execution, which often gives them an advantage over older, more established exchanges, such as the New York Stock Exchange (NYSE).

Because ECNs eliminate human interaction in the share-trading process, the system allows investors to trade anonymously, matching buyers and sellers in a sort of stock traders' dating service.

The downfall to ECNs is that unless there is an exact match, the sale cannot be executed.

It is analogous to Instinet's current share-price woes. At roughly $7 a share, Instinet might seem a bargain but few suitors may emerge.

Analysts say with investors - including Reuters own employees - now holding shares worth less than half what they paid for them, finding a merger-willing peer to face angry shareholders could be a challenge.

Reuters itself, in proposing its own buyout deal, may find itself reticent in an era defined by jaded investors - some of who also happen to be employees.